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Cablegate: Assistant Ustr Eissenstat Discusses Ptpa Way Forward With

VZCZCXYZ0000
RR RUEHWEB

DE RUEHPE #3674/01 2572223
ZNR UUUUU ZZH
R 142223Z SEP 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 2300
INFO RUEHBO/AMEMBASSY BOGOTA 3896
RUEHBU/AMEMBASSY BUENOS AIRES 2578
RUEHCV/AMEMBASSY CARACAS 9778
RUEHQT/AMEMBASSY QUITO 0682
RUEHLP/AMEMBASSY LA PAZ SEP SANTIAGO 0845
RUEHGV/USMISSION GENEVA 0468
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS LIMA 003674

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/AND, WHA/EPSC, EB/OMA, EB/TPP
COMMERCE FOR 4331/MAC/WH/MCAMERON
USTR FOR EEISSENSTAT, BHARMAN AND MCARRILLO
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: ETRD ECON EINV OTRA PE
SUBJECT: ASSISTANT USTR EISSENSTAT DISCUSSES PTPA WAY FORWARD WITH
TRADE MINISTER


1. (SBU) Summary: Assistant USTR Everett Eissenstat discussed
Congressional passage of the Peru Trade Promotion Agreement (PTPA)
during a visit to Peru August 31 - September 1, 2006 with Minister
of Trade Mercedes Araoz, key trade officials and other government
and private sector representatives. During his main working meeting
at the Trade Ministry, Eissenstat urged GOP officials to focus on
marshalling arguments for the U.S. Congress to pass the PTPA rather
than pushing for renewal of Andean Trade Preference Act
(ATPA/ATPDEA/ATPDEA) preferences. He stressed the importance of
coordinating the GOP messages among the different players, such as
Presidential envoy Hernando de Soto, Trade Minister Mercedes Araoz
and the private sector. He urged GOP officials to be in a listening
mode with the U.S. Congress and to try to address their concerns on
labor and other issues in a coordinated fashion. End Summary.

Urgency of Passage
------------------

2. (SBU) Assistant U.S. Trade Representative Everett Eissenstat met
with newly appointed Minister of Trade and Tourism Mercedes Araoz on
September 1. Eissenstat was accompanied by the Ambassador, Deputy
A/USTR Bennett Harman, USTR Director for Andean Affairs Michelle
Carrillo, and Emboffs. Minister Araoz stressed that the GOP looked
to swift passage of the PTPA by the U.S. Congress and entry into
force as soon as possible because the uncertainty on timing was
creating anxiety among Peruvian and American businesses. Eissenstat
said the USG was strongly supportive of the PTPA and said the Garcia
Administration's new team was very strong.

3. (SBU) Minister Araoz noted that implementation would take some
time, so quick action by the U.S. Congress was needed to make entry
into force by January 1 possible. She also explained that the
Peruvian Congress' committees on the economy, agriculture, and trade
were currently favorable to the Garcia Administration and the PTPA,
and that the Garcia Administration was still enjoying its honeymoon
phase. She said the later the Peruvian congress looked at passing
implementing measures, the more difficult, noting that the PTPA
would be "dead" if Ollanta Humala's party took over the chairmanship
of the Agriculture Committee (it's currently chaired by President
Garcia's APRA party). Eissenstat said this was a very compelling
argument to keep moving the process along as expeditiously as
possible.

Engaging US Congress
--------------------

4. (SBU) Assistant USTR Eissenstat told the trade ministry officials
that USTR was fully engaged with the U.S. Congress on the PTPA, and
said he would be meeting with Senate staffers to discuss labor
issues in Peru. Eissenstat recommended that on their first visits
to Washington, Peruvian officials, including President Alan Garcia's
special envoy for the PTPA Hernando de Soto, be in listening mode.


Bridging Any ATPA/ATPDEA-PTPA Gap
--------------------------

5. (SBU) The Peruvians asked if a very brief ATPA/ATPDEA extension
would be possible if PTPA does not pass before January 1, or if the
USG was planning other measures to bridge any time gap in order to
avoid a spike in tariffs. They said textile companies, Peru's
primary non-traditional export employer, were already losing U.S.
clients who feared having to pay 20-23 percent tariffs (e.g. JC
Penney recently dropped a Peruvian supplier), and that banks did not
want to give investment loans due to the uncertainty of passage and
entry into force timing. Minister Araoz said that U.S. buyers had
also contacted the trade ministry because they wanted to keep their
suppliers. She noted that the growth rate of textile exports to the
U.S. had been cut in half in the last quarter and that potential
investments were on hold or had gone elsewhere because of the
uncertainty. Minister Araoz said the GOP was exploring whether it
could insure Peruvian exporters against potential duty liabilities
and asked if the USG could provide administrative relief in the
event of a lapse in benefits.

6. (SBU) A/USTR Eissenstat assured the trade officials that the USG

was engaged with the U.S. Congress on the problem, but that only
Congress can extend benefits. He noted that many in Congress
currently refused to consider an ATPA/ATPDEA extension, but that
political will to solve the problem might increase as the PTPA
momentum builds. He stressed that the primary objective should be
to secure Congressional passage of the PTPA, since no passage would
be much worse than a possible transition gap.

Resolving Beef SPS Issue
------------------------

7. (SBU) Following a high-level meeting with President Garcia, envoy
de Soto and Foreign Minister Garcia Belaunde on August 31, Araoz
said a GOP multiagency working group would likely find a way to
resolve the issue of exporting U.S. beef of over 30 months of age.
She requested that USTR send a letter to the GOP similar to the one
provided to Colombia, which stated that exported U.S. beef of over
30 months of age met the same standards as beef consumed in the
U.S., scientifically safe, etc. She said this letter would give
President Garcia cover to explain to the Peruvian public that the
GOP was not giving in to arbitrary U.S. demands, but had received
the adequate assurances that beef over 30 months was proven safe to
consume. A/USTR Eissenstat said he would carry that request back to
Washington.

Labor: Requesting Assistance
----------------------------

8. (SBU) Minister Araoz said the PTPA should prove less contentious
on labor than CAFTA or the Oman FTA. She said President Garcia had
prioritized improving labor conditions. The GOP has already been
working on increasing the number of labor inspectors, improving
rights for service workers and has "named and shamed" a list of
several thousand companies with unpaid labor and workplace fines
that totaled almost USD 50 million. Her team noted that some of the
International Labor Organization (ILO) complaints had already been
resolved or lifted. They said the GOP would be requesting labor
capacity building funding from the U.S. and from the ILO similar to
what was provided to other countries that concluded FTAs with the
U.S.

9. (SBU) A/USTR Eissenstat said USTR would discuss labor issues with
the U.S. Congress and with the GOP as they emerged. Minister Araoz
said it would be important to highlight this U.S.-Peru labor
cooperation during President Garcia's October visit to Washington.

Implementation
--------------

10. (SBU) The Peruvian trade officials asked for USTR's guidance on
how to proceed with implementation, stressing they wanted to avoid a
painful process and have the agreement enter into force as soon as
possible. They said they had already established interagency
working groups and asked who would be their USG counterparts.
A/USTR Eissenstat said that USTR would consult with the GOP on an
implementation package, but urged that the focus for the immediate
term be on U.S. Congressional consideration of the agreement. He
mentioned the experience of the CAFTA countries and the need for
quick and accurate translations, and said implementation issues
could be discussed further during Minister Araoz's visit to
Washington.

COMMENT
-------

11. (SBU) A/USTR Eissenstat's discussions with Peruvian officials
here have helped focus the government on what they will need to do
as Congress considers the Peru Trade Promotion Agreement this fall.
Business remains somewhat concerned on the timing of Congressional
action on the agreement, and the potential downside if ATPA/ATPDEA
expires and the agreement has not entered into force. President
Garcia's naming of economist Hernando de Soto as his personal envoy
and the President's own public reaffirmation of support for the PTPA
have allayed some concerns at home and abroad. As Peruvian
officials and private sector representatives step up their travel
and consultations in Washington, the GOP will have a clearer picture

of how to better craft their message and work with their
Congressional and USG interlocutors to obtain passage of this
important agreement. End Comment.

12. (U) This cable has been cleared by USTR.

STRUBLE

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